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Home » For Borrowers » Dealing with Student Loan Debt » Default & Debt Collection » Settling Student Loan Debt

Settling Student Loan Debt

If you have student loan debt, whether you are in default or not, you may be able to work with the Department of Education to settle your debt for less than what you owe. This is called settlement and compromise. It is worth considering a settlement or compromise if you have a fairly large lump sum to offer.  It can be difficult to negotiate this type of deal.

The Department of Education provides limited guidance on what they are likely to accept, but you may be able to have collection fees and a portion of your interest waived to settle your student loan debt. You can reach out to your loan holder to see if they are open to settling the debt or contact the Federal Student Aid Ombudsman.

If you agree to a settlement, make sure to get the final agreement in writing and confirm that the settlement means that the loan is paid in full and that you no longer owe anything.

There may be tax consequences if you get a student loan settlement.  It is a good idea to consult a tax professional for more information.

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The National Consumer Law Center (NCLC) shares stories about borrower issues with lawmakers and policy advocates on a regular basis. Share your story and help us fight to make the law better for borrowers!


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